MCD vs. SBUX

Post Image I love McDonald’s. Have ever since I was a kid. If I have to choose between McDonald’s and another fast food joint, I’ll choose McDonald’s almost every time. I don’t go there because the food is healthy, and I don’t go there because the environment is relaxing and enjoyable. I go there because the food is inexpensive, convenient, and consistent. I love the double cheeseburger, and it never lets me down. Oh and the fries, you simply can’t go wrong with McDonald’s fries!

I also love Starbucks. Not since I was a kid mind you, but I can still remember the first time my parents took me there. I had a Caramel Macchiato, and fell in love with both the drink and the place. These days I have a grande drip coffee every morning, though I still enjoy the Macchiato and other “signature” beverages from time to time (probably more often than I should). Like McDonald’s, Starbucks is convenient and consistent, but it also offers a wonderful experience.

McDonald’s is the largest restaurant chain in the world, with well over 30,000 locations scattered across the globe. In his book The Lexus and the Olive Tree, New York Times columnist Thomas L. Freidman noted that “no two countries that both had a McDonald’s had fought a war against each other, since each got its McDonald’s.” (there are two exceptions to this). To me this says two things. First, the rise of McDonald’s is fairly recent. Second, it’s everywhere, and it seems impossible for another chain to become as pervasive.

Starbucks likes to tackle problems that seem impossible, such as selling $4 lattes and running two successful stores across the street from one another. As Taylor Clark notes in his book Starbucked, the only company that has a realistic shot at surpassing the presence of McDonald’s is Starbucks. Currently there are over 15,000 locations worldwide, more than half of which are owned entirely by the company (McDonald’s outlets on the other hand are franchised). That’s not bad considering that McDonald’s had a 30-year head start!

Why am I writing about these two companies? Well each is fascinating on its own, but put them together in a global battle for food and beverage supremacy, and you’ve got something that’s especially interesting! And that is what appears to be happening:

McDonald’s Corp’s plan to expand the beverage lineup at its U.S. restaurants with cappuccinos, lattes and other drinks is expected to add $1 billion to annual sales…

McDonald’s has even added a “barista” position in its restaurants and dedicated a section of counter space to the automated espresso machines so customers can see the drinks being made, spokeswoman Danya Proud said.

It was last year that Starbucks decided they would start offering food in addition to coffee. None of the outlets I regularly visit offer breakfast, despite the company making a big push back in July (perhaps that was mostly in the US).

So are the two on a collision course? I don’t think so. I pretty much agree with this Time piece. Even though the clientele at Starbucks is diversifying, it’s hard to envision one company stealing customers from the other, at least not in great numbers. Besides, you’d think the two would cancel out – McDonald’s gains a few new coffee customers, Starbucks gains a few new food customers. Check out this Economist article for more.

For me at least, there is very little overlap between the two (as I tried to point out in the first two paragraphs above). I don’t visit McDonald’s at the expense of Starbucks, nor do I visit Starbucks at the expense of McDonald’s. And even if their respective menus started looking more alike, I can’t imagine that it would change anything for me.

That said, it’s an interesting battle that will be fun to watch over the next few years!

Chicken Snack Wrap

Post ImageI haven’t been watching much TV lately, so if there were commercials for McDonald’s new Chicken Snack Wrap, I didn’t see them. The first time I had heard of the sandwich was when I stopped in for a quick dinner last night. Apparently I had good timing, because this press release is dated yesterday!

In an effort to meet increasing demands from Canadian customers for quality food they can eat on-the-go, McDonald’s Canada today introduced a highly-portable snacking option with the launch of the new Chicken Snack WrapT.

The new Chicken Snack Wrap, available at participating McDonald’s restaurants across Canada beginning April 10 for only $1.79 plus tax, has warm, juicy seasoned and breaded all-white chicken breast meat, topped with a creamy ranch sauce, crisp lettuce, shredded Cheddar and Monterey Jack cheeses, all freshly wrapped in a soft, flour tortilla.

I wasn’t sure what to expect, but I gave it a chance. And I quite enjoyed it! It tastes real, as bad as that sounds, not like something you’d normally get at McD’s. According to their nutrition calculator, the Chicken Snack Wrap will set you back 320 calories.

The only thing I would change would be to make it $1.39 like all of the times on the Real Deal menu.

Read: McDonald’s

Breakfast at Starbucks

Post ImageWhen I go to Starbucks I order coffee and nothing else. I avoid the pastries because, well, they suck. Even the rice krispie squares, which are one of my favorite treats, just aren’t very good at Starbucks. I’d definitely be willing to try one of their new breakfast sandwiches though (via Starbucks Gossip):

In the frenzy of grab-and-go breakfast that seizes the nation each morning, the trek from Starbucks (for coffee) to McDonald’s or another destination (for food) has become a familiar one. Even as Starbucks has developed a mass following for its dark, super-roasted coffee and its iced, frothed, blended and flavored offspring, the company has struggled to get its food up to par.

Thus, the latest move by Starbucks is a big one: challenging McDonald’s by introducing hot egg-and-cheese sandwiches on English muffins, just as McDonald’s is promoting its new higher quality coffee.

And from the sounds of things there is more food on the way. They don’t have kitchens in the stores, but instead have invested in “high-speed, high-heat” ovens. It appears as though lots of effort has gone into solving the no-kitchen-problem, and even McDonald’s is impressed with the solution Starbucks has come up with:

“It’s a fine technology,” admitted Mr. Thompson of McDonald’s. “We won’t use it, but it’s surprisingly good.”

I’m a big fan of the Egg McMuffin, but who knows, maybe the Starbucks ovens can really produce something good. Hopefully some of the Canadian Starbucks stores get updated soon so I can find out!

Read: NY Times

Twenty Years of Burgernomics

Post ImageWay back in 1986, the editor of The Economist had the brilliant idea to invent a Big Mac index, as a “light-hearted introduction to exchange-rate theory.” I first learned of the index roughly three years ago when I took an international economics course, and I thought it was rather ingenious. This year marks the 20th anniversary, so The Economist is looking back on the index:

The Big Mac index is most useful for assessing the exchange rates of countries with similar incomes per head. Thus, among emerging markets, the yuan does indeed look undervalued, while the currencies of Brazil, Turkey, Hungary and the Czech Republic look overvalued. Economists would be unwise to exclude Big Macs from their diet, but Super Size servings would equally be a mistake.

According to the latest edition of the index (May 22), the cheapest place in the world to buy a Big Mac is in China, where it costs just $1.31 USD. The most expensive place is Norway, at $7.09 USD. Here in Canada, we’re only four cents more expensive than our American counterparts, at $3.14 USD.

The index was never intended to be a precise predictor of currency movements, simply a take-away guide to whether currencies are at their correct long-run level. Curiously, however, burgernomics has an impressive record in predicting exchange rates: currencies that show up as overvalued often tend to weaken in later years.

I wonder if it will continue to be as successful in the next twenty years. In any case, I am sure it will continue to be one of the more interesting indexes that economics has produced.

Read: The Economist

The Arch Card

I was browsing around looking for the McDonald’s McDeal menu (which is apparently different depending on what province you’re in, and no I didn’t find it, the McDonald’s Canada website is completely useless, and yes I know it off by heart for Alberta) and came across this post on the McChronicles weblog:

McDonald’s has rolled out their Arch Card, just in time for the holidays. It’s a great idea.

The McChronicles usually bristles at the concept of debit cards (giving an institution a free cash loan – with the risk of losing the card or leaving change on the card). But these cards offer a great way to give the gift of a nice McDonald’s meal, in denominations as small as $5. That’s cool especially around the holiday season.

You can think of the Arch Card like the Starbucks card – you can load it up (in store only for the time being) and check your balance and recent purchase history online. I think the “free cash loan” idea the McChronicles mention is funny, though correct. Personally, I’d be more worried that using the card will make it seem like I am not spending as much money as I actually am. That’s what happens with my Starbucks card!

Unfortunately, no word on if or when we’re going to get the Arch Card in Canada. Considering it only appeared in the United States last month, it might take a while. Cool idea though!

Read: Arch Card